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Why Is It Important for UAE Companies to Maintain Books of Account & Audits?

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UAE companies must carry out audits to ensure the compliance of their financial statements with the UAE's financial legislation, and to ensure the credibility and improvement of their facilities. It functions by having an auditor examine and review an organization’s books of account in order to determine whether earnings and losses match up with their financial report, ascertain the correctness of the statements, and identify any fraud or mistakes. But many companies, particularly SMEs, still don't maintain their books of accounts or conduct financial statement audits. Such companies have to begin keeping their books of accounts and preparing correct financial statements by corporate tax experts in the UAE before the government issues the UAE Corporate Tax Law.

The UAE Corporate Tax is expected to come into effect on June 1, 2023. However, the government might release the Corporate Tax Law earlier than that. Businesses have a short period to be ready for corporation tax. Even while it is best to make important tax decisions after the law is passed, keeping up with your books of accounts must be done right away. UAE Corporate Tax is expected to be implemented soon, so we will be discussing the importance of maintaining a set of books of accounts for UAE companies in this blog.

License renewal

In the UAE, there are restrictions on the preparation of accounts, the maintenance of accounts, the appointment of auditors, etc. in both mainland and free zones. When renewing a license, the federal agency in charge of implementing these restrictions requires the filing of audited financial records. Some businesses that have been in existence for a while but have never prepared or filed an audited report have even been required to provide yearly financial reports ever since they were founded. Given the strain of a license renewal deadline, this activity might be very time-consuming and expensive. Maintaining the book of accounts correctly and having them audited annually is advised.

Reduces the risk of fraudulent activity

Regardless of the sector, size, or jurisdiction in which an organization operates, fraud is unquestionably one of the biggest threats to governance. An internal audit is essential in preventing damage to corporate goals as well as assisting in minimizing the financial and reputational impacts of fraud.

Auditing is a reliable and effective method of identifying and preventing fraud. To improve their effectiveness and ensure fraud prevention, audits have nevertheless undergone significant changes in terms of type, quality, and particular methods over time. Since statistics show that most frauds are perpetrated from within the organization, it is usually wiser to depend on external auditors.

Tax compliance

According to the Public Consultation Document, businesses will have to maintain books of accounts in order to explain the information contained in the UAE Corporate Tax Return as well as other documents that will be submitted to the Federal Tax Authority (FTA). In order to comply with corporate tax regulations in the UAE, you may be required to maintain financial reports, accounting books, and financial statements. The books must be accurate and free of any omitted revenue or expenses. Profits from the sale of goods or services, commissions, interest, capital gains, and rent are all included in your accounting income. Additionally, firms must record "capital" in their accounts in order to provide documentation for their investments and disbursements.

Liquidation

Several different factors, such as lack of profitability, financial restructuring, the sale of underlying assets, or the departure of a key employee, will necessitate liquidation. To deregister your business in the UAE, you must first revoke all of your licenses and permissions and hire a liquidator. Registered auditors will be required to prepare a liquidation report, for which they will need previous audit reports, a balance sheet, profit and loss information for the current period, and other data as of the liquidation dates. Auditors can prepare finalized liquidation reports more easily when the transaction is recorded systematically.

Why choose Alchemist Accounting?

With the UAE's corporate tax set to take effect soon, businesses will have to maintain their books of accounts and prepare financial statements in order to comply with the tax laws. Due to this changed scenario, it has become increasingly crucial for companies to seek the advice of corporate tax advisers in the UAE, such as Alchemist Accounting, which provides top-notch accounting and bookkeeping services. The audit services we offer in Dubai can help you to get a clear understanding of your business transactions and access an accurate risk assessment report, giving you a better understanding of your business's risks and building a better reputation for your company.